Ardent Corporation currently has 20 million shares outstanding with a current price of $45 per...
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Ardent Corporation currently has 20 million shares outstanding with a current price of $45 per share. Ardent also has debt with a market value of $300 million and an expected return of 6%. Ardent is expected to have EBIT by the end of this year of $90 million, and its EBIT is expected to grow at a 4.5% rate forever. New capital expenditures are expected to equal depreciation every year, and no changes to the net working capital are expected in the future. Investors expect Ardent to maintain its current debt-equity ratio in the future. The firm has no excess cash on its balance sheet. Ardent pays a corporate tax rate of 40%. The current risk-free rate is 6% at all maturities, and the current expected return of the market portfolio is 11%. What is Ardents weighted-average cost of capital?
| 11.775% |
| 8.475% |
| 10.875% |
| 7.875% |
| 12.000% |
| 9.000% |
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